Mutual Funds

Definition: A mutual fund is made up of money that is pooled together by a large number of investors who give their money to a fund manager to invest in a large portfolio of stocks and/or bonds.

TeenAnalyst Advice: Mutual funds are great because they offer regular investors a chance to diversify their portfolios, which is something they may not be able to do on their own.  Consider this, if you want to build a diversified portfolio of 30 stocks, you would probably need $30,000 to get started ($1000 per stock...which is usually the norm).  Or you could open up an account with a mutual fund for just $1000.

There's about 10,000 mutual funds out there, and they come in all different shapes and sizes.  Be sure to check out our mutual fund section!

Jonny Boy said:

This is the definition I used on my exam:Mutual Fund is an open-ended fund operated by an investment company which raises the money from the shareholders and invests in a group of assets, in accordance with a stated set of objectives. Mutual funds raise money by selling shares of the funds to the public, much like any other type of company can sell stock in itself to the public. Mutual funds then take the money they receive from the sale of their shares, along with any money made from the previous investments, and use it to purchase various investment vehicles, such as stocks, bonds, and money market instruments.